The Equifax Data Breach
On September 7, 2017, Equifax, one of the three main credit reporting agencies, announced a massive data security breach that exposed vital personal identification data— including names, addresses, birth-dates, and Social Security numbers on as many as 143 million consumers, roughly 55% of Americans age 18 and older.1
This data breach was especially egregious because the company reportedly first learned of the breach on July 29 and waited roughly six weeks before making it public (hackers first gained access between mid-May and July) and three senior Equifax executives reportedly sold shares of the company worth nearly $2 million before the breach was announced. Moreover, consumers don’t choose to do business or share their data with Equifax; rather, Equifax — along with TransUnion and Experian, the other two major credit reporting agencies — unilaterally monitors the financial health of consumers and supplies that data to potential lenders without a consumer’s approval or consent.2
Equifax has faced widespread criticism following its disclosure of the hack, both for the breach itself and for its response, particularly the website it established for consumers to check if they may have been affected. Both the FBI and Congress are investigating the breach.3 In the meantime, here are answers to questions you might have.
1. What’s the deal with the website Equifax has set up for consumers?
Equifax has set up a website, www.equifaxsecurity2017.com/, where consumers can check if they’ve been affected by the breach. Once on the site, click on the button “Potential Impact” at the bottom of the main page. You then need to click on “Check Potential Impact,” where you will be asked to provide your last name and the last six digits of your Social Security number — a request that was widely mocked on social media as being too intrusive when the standard request is for only the last four digits.
Equifax has stated that regardless of whether your information may have been affected, everyone has the option to sign up on the website for one free year of credit monitoring and identify theft protection. You can do so by clicking the “Enroll” button at the bottom of the screen. Note: Just clicking this button does not mean you’re actually enrolled, however. You must follow the instructions to go through an actual enrollment process with TrustedID Premier to officially enroll.
More wrath was directed at Equifax when some eagle-eyed observers noted that enrolling in the free year of credit protection with TrustedID Premier meant that consumers gave up the right to join any class-action lawsuit against the company and agreed to be bound by arbitration. But an Equifax spokesperson has since stated that the binding arbitration clause related only to the one year of free credit monitoring and not the breach itself; Equifax has since removed that language from its site.4
2. What is TrustedID Premier?
Equifax’s response to the data breach is to offer consumers one free year of credit file monitoring services through TrustedID Premier. This includes monitoring reports generated by Equifax, Experian, and TransUnion; the ability to lock and unlock Equifax credit reports with a credit freeze; identity theft insurance; and Social Security number monitoring.
Consumers who choose to enroll in this service will need to provide a valid email address and additional information to verify their identity. A few days after enrolling, consumers will receive an email with a link to activate TrustedID Premier. The enrollment period ends November 21. After the one free year is up, consumers will not be automatically charged or enrolled in further monitoring; they will need to sign up again if they so choose (some initial reports stated that consumers would be automatically re-enrolled after the first year).5
3. What other steps can I take?
It is always a good idea to monitor your own personal information and be on the lookout for identity theft. Here are specific additional steps you can take:
- Fraud alerts: Your first step should be to establish fraud alerts with the three major credit reporting agencies. This will alert you if someone tries to apply for credit in your name. You can also set up fraud alerts for your credit and debit cards.
- Credit freezes: A credit freeze will lock your credit files so that only companies you already do business with will have access to them. This means that if a thief shows up at a faraway bank and tries to apply for credit in your name using your address and Social Security number, the bank won’t be able to access your credit report. (However, a credit freeze won’t prevent a thief from making changes to your existing accounts.) Initially, consumers who tried to set up credit freezes with Equifax discovered they had to pay for it, but after a public thrashing Equifax announced that it would waive all fees for the next 30 days (starting September 12) for consumers who want to freeze their Equifax credit files.6 Before freezing your credit reports, though, it’s wise to check them first. Also keep in mind that if you want to apply for credit with a new financial institution in the future, or you are opening a new bank account, applying for a job, renting an apartment, or buying insurance, you will need to unlock or “thaw” the credit freeze.
- Credit reports: You can obtain a free copy of your credit report from each of the major credit agencies once every 12 months by requesting the reports at www.annualcreditreport.com or by calling toll-free 877-322-8228. Because the Equifax breach could have long-term consequences, it’s a good idea to start checking your report as part of your regular financial routine for the next few years.
- Bank and credit card statements: Review your financial statements regularly and look for any transaction that seems amiss. Take advantage of any alert features so that you are notified when suspicious activity is detected. Your vigilance is an essential tool in fighting identity theft.
4. How can I get more information from Equifax?
Consumers with additional questions for Equifax can call the company’s dedicated call center at 866-447-7559. The call center is open seven days a week from 7 a.m. to 1 a.m. Eastern time. Equifax said it is experiencing high call volumes but is working diligently to respond to all consumers.7
1, 3-5,7) The Wall Street Journal, September 8, 2017, September 10, 2017
2) CNNMoney, September 8, 2017
6) The New York Times, September 12, 2017
What I learned from my grand daughter
Being with the family is generally very enjoyable. This year I received an extra benefit from my 5-year-old granddaughter. She was telling us what she was going to be doing. It sounded like she was too young to be able accomplish the task. We asked her how she would complete the tasks. She explained that she would visualize what she was going to do. Her teacher had taught the class to visualize what they want to do.
I realized that is also the approach to planning. If you know what you want to accomplish, you need to see where you are, where you want to be and the steps required to get there. This sets your focus. You need to be aware of your progress. You may need to adjust your course if there are changes in your priorities, what you have or your goals.
If you have postponed your planning, try visualizing.
Wishing you and yours the best for the Holiday’s and the entire New Year!
October Is National Disability Employment Awareness Month
Observed each year in October, National Disability Employment Awareness Month (NDEAM) is led by the Department of Labor’s Office of Disability Employment Policy (ODEP). The purpose of NDEAM is to build awareness about disability employment issues and celebrate the many and varied contributions of workers with disabilities. This year’s theme is “InclusionWorks.”
Employers, associations, and unions in all industries are encouraged to participate. To help organizations build awareness of this important initiative, the DOL has developed a number of resources, which can be accessed at dol.gov/odep/topics/ndeam/.
What is NDEAM?
National Disability Employment Awareness Month dates back to 1945, when Congress enacted a law declaring the first week in October “National Employ the Physically Handicapped Week.” In 1962, the word “physically” was removed to acknowledge the employment needs and contributions of individuals with all types of disabilities. In 1988, Congress expanded the week to a month and changed the name to National Disability Employment Awareness Month.
“By fostering a culture that embraces individual differences, including disabilities, businesses profit by having a wider variety of tools to confront challenges,” said Jennifer Sheehy, deputy assistant secretary of labor for disability employment policy. “Our nation’s most successful companies proudly make inclusion a core value. They know that inclusion works. It works for workers, it works for employers, it works for opportunity, and it works for innovation.”
How can organizations participate?
The DOL’s suggestions range from simple promotional activities, such as putting up a poster, to comprehensive programs, such as implementing a disability education program for all employees or organization members. Resources available on the website include press releases, posters, a sample proclamation for organizational and government leaders, articles for internal publications, sample social media content, and tips for improving social media accessibility.
What is the ODEP?
The Office of Disability Employment Policy is the only nonregulatory federal agency that promotes policies and coordinates with employers and all levels of government to increase workplace success for people with disabilities. Recognizing the need for a national policy to ensure that people with disabilities are fully integrated into the 21st century workforce, the Secretary of Labor delegated authority and assigned responsibility to the Assistant Secretary for Disability Employment Policy. ODEP is a subcabinet-level policy agency in the Department of Labor.
For more information on ODEP, visit dol.gov/odep/.
IRS warning about fake emails(CP2000) relating to the Affordable Care Act
Confronting the latest scheme to target taxpayers, the IRS and its Security Summit partners warned Thursday that scammers have sent fake emails purportedly containing CP2000 notices, which are used in the IRS’s Automated Underreporter Program. The IRS emphasized that it never sends these notices by email, and instead uses the U.S. Postal Service (IR-2016-123).
The notices contain an IRS tax bill supposedly related to the Patient Protection and Affordable Care Act and 2014 health care coverage. They use an Austin, Texas, post office box and request payments to the “I.R.S.” at the “Austin Processing Center.” The email also contains a payment link. The fraudulent email lists the letter number as “105C.”
The IRS explains that its procedures for taxpayers who owe additional tax require taxpayers to write checks payable to the “United States Treasury,” not the “I.R.S.,” as in the fake notice. It also advises taxpayers that they can check a notice’s validity on the IRS’s website by doing a search, and they can see sample notices at Understanding Your IRS Notice or Letter.
IRS impersonation scams take many forms: threatening telephone calls, phishing emails and demanding letters. Learn more at Reporting Phishing and Online Scams.
Taxpayers who receive this scam email should forward it to phishing@irs.gov and then delete it from their email account.
Taxpayers should always beware of any unsolicited email purported to be from the IRS or any unknown source. They should never open an attachment or click on a link within an email sent by sources they do not know.
New Real Estate Sector Puts Equity REITs in the Spotlight
Publicly traded REITs and other listed real estate companies are being moved to a distinct Real Estate sector by S&P Dow Jones Indices and MSCI.
S&P Dow Jones Indices and MSCI recently moved publicly traded equity real estate investment trusts (REITs) and other listed real estate companies from the Financials sector into a new, separate Real Estate sector effective September 1, 2016. (Mortgage REITs remain in the Financials sector, along with banks and insurance companies.) There are now 11 headline sectors instead of 10. It’s the first time a new sector has been added to the Global Industry Classification Standard (GICS®) since it was created in 1999. (1)
The move has implications for investors, because S&P and MSCI indexes are common benchmarks for investment performance, and the GICS is often used as a framework for portfolio construction. By some estimates, fund managers could shift as much as $100 billion to the Real Estate sector in a collective effort to follow the market weightings of various indexes. (2)
The change could also affect the asset allocation decisions of some individual investors by drawing more attention to equity REITs as income-generating assets with the potential for capital appreciation.
Fixed-income appeal
An equity REIT is a company that combines capital from investors to buy and manage income properties such as apartments, shopping centers, hotels, medical facilities, offices, self-storage units, and industrial buildings. Publicly traded REIT shares can generally be bought or sold on an exchange at a moment’s notice, making them more liquid than physical real estate investments, which involve transactions that can take months to complete.
Many REITs generate a reliable income stream regardless of share price performance, primarily because they are required by law to pay out 90% of their taxable incomes as dividends to stakeholders. In the second quarter of 2016, the S&P REIT index had a dividend yield of 3.73%. (3) The performance of an unmanaged index is not indicative of the performance of any specific security. Individuals cannot invest directly in an index.
REIT share prices can be sensitive to interest rates. As rates rise, steady dividends may appear less attractive to investors relative to the safety of bonds offering similar yields. On the other hand, current fundamentals, including modest economic growth, lower unemployment, and rising rents, are generally seen as positive conditions for REITs and other real estate businesses.
Diversification tool
Breaking real estate out of the Financials sector acknowledges that the industry’s business models and ties to underlying property markets produce a distinctive risk-return profile, including a relatively low correlation to the rest of the stock market. (4) Because the share prices of equity REITs don’t rise and fall in lockstep with the broader stock market, including them in your portfolio could help reduce the overall level of risk.
The return and principal value of all stocks, including REITs, fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost. Diversification and asset allocation do not guarantee a profit or protect against investment loss; they are methods used to help manage investment risk.
REIT distributions are taxable to the extent they include any ordinary income and capital gains. Some REITs may not qualify as a REIT as defined in the tax code, which could affect operations and negatively impact the ability to make distributions.
There are inherent risks associated with real estate investments that could have an adverse effect on financial performance. Such risks may include a deterioration in the economy or local real estate conditions; tenant defaults; property mismanagement; and changes in operating expenses (including insurance costs, energy prices, real estate taxes, and the cost of compliance with laws, regulations, and government policies).
Breaking real estate out of the Financials sector acknowledges that the industry’s business models and ties to underlying property markets produce a distinctive risk-return profile, including a relatively low correlation to the rest of the stock market.
(1) , (3) S&P Dow Jones Indices, 2015-2016
(2) Investor’s Business Daily, March 18, 2016
(4) FinancialAdvisor.com, March 1, 2016
The foregoing is provided for information purposes only. It is not intended or designed to provide legal, accounting, tax, investment or other professional advice. Such advice requires consideration of individual circumstances. Before any action is taken based upon this information, it is essential that competent, individual, professional advice be obtained. JAS Financial Services, LLC is not responsible for any modifications made to this material, or for the accuracy of information provided by other sources.
Identity Theft
It seems there are an increasing number of reports of identity theft ID). I recently saw an article by Sid Kirchheimer that was published by AARP about the use of identities of people that have died. “Postmortem identity theft may be shocking but it’s hardly rare, especially because the victims.”
One of the best known sources of information for ID is the Social Security Administration’s Death Master File. The list is maintained to allow employers, financial institutions and government agencies to identify fraud. That file’s use is intended to be restricted to those entities.
“But federal law requires a version known as the Social Security Death Index be made available to the public.” Social security numbers are not on the list. Information on the list is often enough information for ID theft. The details maybe available free on genealogy and other websites.
Kirchheimer’s article includes the following to block ID theft of the deceased:
- “Immediately send death certificate copies by certified mail to the three main credit reporting bureaus. Request that a ‘deceased alert’ be placed in the credit report.
- Mail copies as soon as possible to banks, insurers and other financial firms requesting account closures or change of joint ownership.
- Report the death to the Social Security Administration at 800-772-1213 and the IRS at 800-829-104. Also notify the DMV.
- In obituaries, don’t include the deceased’s birth date, place of birth , last address or job.
- Starting a month after the death, check the departed’s credit report at www.annualcreditreport.com for suspicious activity.
IRS Taxpayer Guide to Identity Theft:
Office of the Inspector General Social Security Social Security Administration – Report Fraud:
The lessons learned from “the old Enron story” still apply.
The following is from Edward Mendlowitz’s Feb. 24, 2015 Blog.
“in his book Money: Master the Game, Tony Robbins dredges up the old Enron story, which I agree with, and want to call to your attention now. Here is a brief listing copied from Tony’s book of the lauds, Enron received right up until their bankruptcy filing.
Mar 21, 2001 Merrill Lynch recommends
Mar 29, 2001 Goldman Sacks recommends
June 8, 2001 J.P. Morgan recommends
Aug 15, 2001 Bank of America recommends
Oct 4, 2001 A G Edwards recommends
Oct 24, 2001 Lehman Brothers recommends
Nov 12, 2001 Prudential recommends
Nov 21, 2001 Goldman Sacks recommends (again)
Nov 29, 2011 Credit Suisse First Boston recommends
Dec 2, 2001 Enron files Bankruptcy
Millions of Investors trusted these venerable firms and followed their recommendations. A question I had at the time was, “How much work did they do before they made their recommendations?” I could not have been too much since every recommendation was wrong. Another observation is that many of the largest mutual funds has significant positions in Enron.
Now, lets fast forward to today. Has anything changed? Were lessons learned? Are more intensive analysis being done now? I suggest that nothing has changed. Examples are in the many recommendations to buy oil stocks a few months ago before a subsequent additional 35% drop. …Next, as Robbins points out, most actively managed mutual funds do not outperform the index they are trying to beat….
The principles in the book are easy to understand, digest and act on…. I have condensed them [his seven steps] and … restate as follows:
1. Commit to regular savings program
2. Know and understand why you are investing in
3. Develop a plan and, while at it, reduce spending, keep investment costs low and shed debt
4. Allocate your assets carefully and rebalance periodically
5. Create a lifetime income plan
6. Invest like the .001%, i.e. don’t be stupid and re-look at step 2
7. Be happy by growing and giving
All good advice you can start following today.
Privacy Breaches
Two recent articles discuss privacy breaches.
“Sidestepping the Risk of a Privacy Breach”, posted by the nytimes.com February 7, 2014, discussed the security of personal data when using “plastic”. A representative of the American Bankers Association expressed concern that criminals seem to be ahead of the marketplace, the regulators and the consumers.
Starting in 2005, there have been 4.167 known breaches that exposed 663,587,386 records of personal information. Recent headlines have revealed continuing breaches at some very large and sophisticated entities.
Over 30% of people whose information was breached in 2013 became victims of some kind of identity theft. That is an increase from about 12% three years ago.
Emails are increasingly exposing us to the threat of breaches to our privacy. If you receive an email asking for personal information and there is anything that raises concern, go to the website and call the entity. If there is a known breach, it may be on the website or the representative of the entity can tell you if it is legitimate.
“Leading a cash-only life is a theoretical possibility, but it boxes you out of most online shopping and makes traveling difficult. Going cash-only mostly means endless trips to the A.T.M. and all the fees and hassle that come with it”.
“With the right tactics, however, it’s easy enough for most people to greatly bolster their odds of avoiding the worst of the problems.”
Gregory Karp’s article “Think before buying ID theft protection” was in The Chicago Tribune Feb. 9, 2014.
He believes that you probably should not subscribe to identify “protection” services, “if your only concern is a thief fraudulently using your payment card information. Typically, that’s not a big deal, and you won’t lose any money. ”
A representative from the Identity Theft Resource Center was quoted: “You can’t make the blanket statement that all of these services are bad or not worth your while.” A representative of the Privacy Rights Clearinghouse indicated the services have “dubious value. It’s fairly expensive, and there are other ways you can protect yourself.”
He noted that Consumer Reports had the following on their website: “Don’t get fleeced by identity-theft protections services.” Gregory noted that some felt the claim of “prevention” and “protection” are exaggerations. The benefit of these services is that they provide more timely alerts to a breach.
If you are thinking of getting this type of service learn exactly what you get. You need to educate yourself and follow through if you do not get this type of service.
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Reverse Mortgage Changes
Several changes have been made to the federally insured Home Equity Conversion Mortgage (HECM) reverse mortgage program to shore up the viability of the program. The changes are generally designed to improve the odds that homeowners taking out a reverse mortgage will be able to meet their obligations and not become a burden on the program. The changes are generally effective for new reverse mortgages after September 30, 2013 (but prior rules generally apply to case numbers assigned before September 30, 2013, if closed on or before December 31, 2013). Additional financial assessment and set-aside requirements take effect January 13, 2014.
Initial disbursements limited
One change generally restricts the amount that can be disbursed to you within one year of your obtaining the reverse mortgage. Under the new rules, the maximum amount that can be disbursed to you at closing or during the first 12-month disbursement period is equal to the greater of (a) 60% of the principal limit or (b) the sum of your mandatory obligations plus 10% of the principal limit (not to exceed 100% of the principal limit). Mandatory obligations include items such as the initial mortgage insurance premium, the loan origination fee, recording fees and taxes, credit reports, a survey, a title examination, title insurance, a property appraisal fee, fees for warranties or inspections, funds to pay any required repairs, and amounts used to discharge liens, debt, and taxes. Except in the case of a single disbursement lump-sum payment option, additional amounts can be disbursed in later years, up to 100% of the available principal limit.
New mortgage insurance premium rates
Another change increases the basic initial mortgage insurance premium, and applies an even higher rate if more than 60% of the principal limit can be disbursed to you in the first year. Under the new rules, an initial mortgage insurance premium fee of 0.5% of the maximum claim amount will generally be charged. The initial fee is increased to 2.5% of the maximum claim amount if required or available disbursements to you at closing or during the first 12-month disbursement period are greater than 60% of the principal amount. In either case, there is also an annual fee equal to 1.25% of the mortgage balance.
Financial assessment and set-asides
Finally, changes are made to improve the odds that you will be able to meet certain of your obligations under the reverse mortgage. For case numbers assigned on or after January 13, 2014, you must undergo a financial assessment prior to approval and closing on a reverse mortgage. Based on your assessment and as a condition of loan approval, you may be required to use proceeds from the reverse mortgage to fund a lifetime expectancy set-aside for payment of property charges or authorize the mortgagee to pay property charges from your monthly payments or your line of credit. Property charges include property taxes, hazard insurance, and flood insurance.
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New Mortgage Rules Scheduled to Take Effect in January
The Consumer Financial Protection Bureau (CFPB) has issued new mortgage rules that are scheduled to take effect on January 10, 2014.
In 2008, the rise in home foreclosures was viewed by many as the result of substandard mortgage lending practices. Subsequently, Congress passed the Dodd-Frank Act in 2010, which created the CFPB and set forth a number of financial industry regulations aimed at protecting consumers, including some pertaining to mortgage lending. In January 2013, the CFPB issued mortgage rules that implement the mortgage provisions set forth by Congress under the act.
Highlights of the new mortgage rules
The new rules broaden coverage of existing ability-to-repay rules, which require a lender to make a reasonable, good faith determination that a consumer has the ability to repay a loan. The rules extend coverage of the ability-to-repay rules to the majority of closed-end transactions secured by a dwelling (with certain exceptions).
In addition, the rules set forth specific procedures a lender must follow when determining a borrower’s ability to repay a loan, including the consideration and verification of certain consumer information (e.g., income, employment status) and the calculation of the borrower’s monthly mortgage payment.
The rules also center on what are referred to as Qualified Mortgages. According to the Dodd-Frank Act, lenders that issue Qualified Mortgages will receive a presumption of compliance with ability-to-repay rules, thereby reducing their risk of challenge from a borrower for failing to satisfy ability-to-repay requirements.
The rules specify various requirements that a loan must meet in order for it to be considered a Qualified Mortgage, including:
- Limits on risky loan features (e.g., negative amortization or interest-only loans)
- Cap on a lender’s points and fees (3% of the loan amount)
- Certain underwriting requirements (e.g., 43% monthly debt-to-income ratio loan limit)
What do the new rules mean for consumers?
The new mortgage rules were mainly put into place as a way to end irresponsible mortgage lending and ensure that borrowers will only be able to obtain a mortgage loan that they can afford to pay back. Proponents view the rules as welcome industry safeguards that simply mirror responsible mortgage lending practices that are already in place.
However, some mortgage-industry experts fear that the new rules may end up making obtaining a mortgage loan more difficult than it has been in the past–especially for borrowers who have a high debt-to-income ratio. Borrowers may also find themselves burdened with the task of providing lenders with additional documentation that they may not have had to in the past.
For more information on the new mortgage rules, you can visit the CFPB website at http://www.consumerfinance.gov/
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